What do two investment advisory firms with $15.5 billion in assets between them have in common with a startup that has attracted more than 200 clients in its first year? The answer: They all have females in leadership positions who have built profitable service models working with next-generation clients. And they’re able to do it without waiting for those clients to meet minimum investable asset levels.
All three women—Cammie Doder of Aspirant, Stacey McKinnon of Morton Wealth and Kamila Elliott of Collective Wealth Partners—are set to share their winning formulas for working with next-generation clients at Financial Advisor magazine’s eighth annual Invest in Women conference in Atlanta, May 1-3.
With $13 billion in assets under management, 70 wealth managers and 11 offices nationwide, Los Angeles-based Aspiriant can boast that its average client (there are 1,600 of them) has $7.5 million invested with the firm. But with the average age of the firm’s clients approaching 60, attrition and revenue losses have been real concerns, says Doder, the firm’s chief marketing officer and partner.
To counter the outflow of assets, Aspiriant has created an “emerging wealth” offering, Doder says. This incentivizes advisors, especially younger practitioners, to help their network of family, friends and peers grow wealth. It also helps the firm establish relationships with millennials, a cohort that stands to inherit $80 trillion from baby boomers over the next two decades.
“We wanted to work with next-gen clients now because we know they are our perfect future clients,” Doder says. “We also knew that telling them to ‘Just go away and call us when you hit our [$1.5 million] minimum’ just wouldn’t work. So we launched our emerging wealth service offering three years ago.”
At Aspiriant, next-gen clients pay a fee of 70 basis points on assets under management, as well as a minimum wealth planning fee that starts at $2,400 annually. Those clients with more complex needs, such as those who need help with stock options and compensation negotiations, will pay a higher planning fee, she says.
“We wanted to charge in the same manner for all clients,” she adds. “We didn’t want to make next-gen clients think, ‘Oh, you’re different,’ because we anticipate they’ll become full-fledged clients in the future.”
By design, Aspiriant’s next-gen effort has brought in 27 younger clients in its first three years, and the firm plans to add another 12 or so clients this year, says Doder, noting that the firm wants to “serve, but not overserve” clients in growth mode.
“It is difficult to make money on next-gen clients in year one, but this is an investment in long-term, profitable relationships,” she says.
She adds that Aspiriant’s emerging wealth offering also provides “an incredible training opportunity for younger advisors,” who receive a bonus for bringing these clients in. “This offering gives them something to talk about with their own network instead of telling prospects they don’t meet our minimum,” Doder says.
Kamila Elliott, the co-founder and CEO of Atlanta-based Collective Wealth Partners, created her firm with three partners a year ago, and it’s geared almost exclusively to next-gen clients. The four partners are Black and cater to Black executives, professionals and business owners in earning mode, she says. (Elliott is also on Financial Advisor’s 2023 list of “Young Advisors To Watch.” See page 40.)
Elliott worked previously as an advisor at another firm for three years where the service offering wasn’t as “high touch.” Now she and her partners focus on individuals who may not yet have significant assets, but have the potential to grow impressive wealth over their lifetimes. The Collective advisors help these clients check all the boxes, aiding them with first home purchases and student debt, she said.
Collective brought on 200 clients in its first year and has garnered 23 clients so far in 2023. The firm offers holistic wealth planning for an annual subscription fee of $4,000 for single clients and $6,000 for couples. Collective also charges a separate fee for business owners, which is the greater of $10,000 per year or 1% of assets under management.
It’s a lot of heavy lifting to work with next-gen clients initially, Elliott says, since in the first year they need “just about everything” from first-time home-buying expertise to insurance and estate planning advice. But she adds that eventually there’s an inflection point and they turn into lifelong clients with significant wealth.
“It’s so enjoyable to help these clients reach major milestones to building wealth, especially since many are my age,” she says.
Calabasas, Calif.-based Morton Wealth manages $2.5 billion for 1,100 clients. McKinnon, the firm’s chief marketing and chief operations officer, says Morton just did a soft launch of its “ModEarn by Morton” service offering for next-generation clients. The firm plans to do a hard launch May 19.
Clients in this channel pay a $6,000 annual subscription fee for a wealth plan that targets their needs one month at a time—from developing a spending strategy and insurance planning to ensuring they manage debt, maximize credit, optimize stock options and make wise real estate decisions, McKinnon says.
“We are targeting earners. It’s a funnel for those who will become Morton wealth clients in eight to 10 years,” she says. “I know this can be a little bit of a struggle for advisors to get their head around, but I’d rather take on a 32-year-old client who makes great income and very good decisions with their money than wait until they’re 55 and have to compete to get them.
“We’ll make a little less on the front end,” she adds, “but think of the years of reoccurring revenue.” Still, she adds, “this is not a low balance offering. We are targeting clients who have complicated lives, side hustles they’re trying to decide whether to turn into an S corp. or limited liability corp. They need a corporate retirement plan and to make wise decisions about stock options and investment real estate. These aren’t college students who just graduated.”
Morton plans to take on 25 of these younger clients this year. McKinnon estimates the firm will earn a 15% profit margin on its first crop of these clients with its investment in marketing, technology and credit card payment options in year one. “But in year two, when we expect to have 40 clients, the profit margin goes to about 40%,” she says. She predicts “ModEarn by Morton” will become a significant chunk of the firm’s business over the next three years.